|A New Approach to Sovereign Debt Restructuring|
|Dr. Anne Krueger, First Deputy Managing Director, IMF
December 20, 2001
|Dr. Anne Krueger, former Professor at Stanford University and currently the First Deputy Managing Director of the International Monetary Fund (IMF), began her lecture by noting that international co-operation among countries is a basic prerequisite to deal with many issues-social, economic, and political-which, by themselves, cannot be dealt with by the individual countries alone. In the lecture, organised by ICRIER, Dr. Krueger pointed out that the international community, and the IMF in particular, has been working towards strengthening the international financial system. While there has been some progress since the financial crises of 1997/98, the problem of some countries having unsustainable external debts continues to loom large. Dr. Krueger stressed that it was not always a good idea for the IMF to give more loans to highly indebted countries, as it merely raised the value of the debts without helping the debtor countries. Instead, Dr. Krueger advocated the adoption of a new approach towards restructuring of sovereign debt.
Dr. Krueger emphasised that her proposals were aimed at taking a balanced view of the interests of debtor nations and their creditors. Among the key elements of her proposals for an ideal debt restructuring process were: there would be a time bound standstill on debt repayments once a country had been judged to be suffering from unsustainable external debt, minority creditors could not disrupt negotiations on debt restructuring through recourse to courts, debtor countries must follow sound economic policies during the debt restructuring process, and debt restructuring should ensure equitable treatment of all creditors. According to her plan, the IMF would be an honest broker in the debt restructuring process. Dr. Krueger pointed out that while debt restructuring would not be easy, her proposal could make a contribution to economic welfare by reducing the occurrence of economic crises. She noted that while her ideas had received considerable support, they were still some distance from being formally accepted by the IMF Executive Board and the international community.
Dr. Krueger’s presentation was followed by a lively question-answer session with the active participation of the audience, consisting of economists, researchers, policy makers, diplomats and media persons. Mr. C.M. Vasudev, Secretary, Economic Affairs, Ministry of Finance, chaired the event.